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HAVEN Act gives veterans more protection in bankruptcy

North Carolina military veterans may find it difficult to make ends meet, especially if they are disabled and relying on military benefits to support themselves. Medical bills and personal bills can stack up, leading to creditor calls and demands for payment. As a result, veterans may find themselves facing low credit scores, difficulty renting or buying a home and even threats of lawsuits. Personal bankruptcy can be an important safeguard as a mechanism that helps people escape the crushing burden of excessive debt. Veterans are particularly affected by bankruptcy. While they make up only 10% of the population overall, they comprise 15% of those filing for both Chapter 7 and Chapter 13 personal bankruptcy.

In one year alone, over 125,000 American veterans filed for personal bankruptcy. Those with disabilities faced particular challenges. During the bankruptcy process, disposable income is calculated. Social Security Disability benefits were always excluded from this calculation, but disability benefits provided by the VA or the Department of Defense were included. In order to be eligible for Chapter 7 bankruptcy, people must fall below an income threshold. In addition, disposable income is used to calculate a payment plan for Chapter 13 bankruptcy filers. Therefore, disability benefits could fall within creditors' reach for military veterans.

A law that went into effect on August 23, 2019, changes that situation, equalizing military disability benefits with Social Security Disability. The HAVEN Act was passed with strong bipartisan support. It excludes a wide range of military disability benefits from calculation of disposable income in any bankruptcy process. This gives veterans an extra level of protection when filing for bankruptcy.

Many people, veterans and otherwise, face a growing debt burden that they are unable to repay. A bankruptcy attorney might provide advice and guidance on how Chapter 7 and Chapter 13 bankruptcy may provide options for debt relief.

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